Similar financial terms
Covered callsA call option that is sold when the seller also owns 100 shares of the underlying stock.
Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes.
Uncovered put
A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.
Uncovered call
A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price.
Rally (recovery)
An upward movement of prices. Opposite of reaction.
Price discovery process
The process of determining the prices of the assets in the marketplace through the interactions of buyers and sellers.
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments, preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation.
Coverage ratios
Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.
Covered call
A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it.
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor owns in his or her portfolio. See covered or hedge option strategies.
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for dollars.
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the underlying stock, designed so that one position will help offset any unfavorable price movement in the other, including covered call writing and protective put buying.
Covered Put
A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option.
Capital coverage ratio
Available capital divided by required capital.
